At the time when the markets are jittery over fears of a second recession, fixed deposits (FDs) of banks have come as a saviour for investors looking for safety of their hard-earned money.
With interest rates nearing their peak and are likely to decline in the coming months, experts put their best bet on FDs.
“Interest rates on fixed deposits have almost peaked now,” said Vijayalakshmi Iyer, executive director, Central Bank of India. “Going forward, interest rates may see a declining trend from November- December 2011.”
There is no pressure on banks to increase deposit rates since there is ample liquidity in the system. Banks also expect credit growth to be muted in the coming days due to continuos rate hike by the Reserve Bank of India (RBI). The RBI has raised key lending rate 12 times over the past 18 months to tame inflation.
To mobilise funds from the public, banks are offering up to 10.5% interest on FDs. While Lakshmi Vilas Bank and Karur Vysya Banks are offering 10.5% and 10.0% interest on one year and less than two-year FDs, big players such as State Bank of India, ICICI Bank, HDFC Bank and Punjab National Bank are offering 8.3-9.5% interest for FDs maturing in one to two years.
Investors seeking to invest for around one year should go for FDs, experts advice.
“The investor who has an investment horizon of around one year should go for bank FDs and fixed maturity plan of mutual funds,” said Amar Pandit, CEO, My Financial Advisor.
Experts also suggest that investors should not be disturbed by the current market volatility and advise people to invest through systematic investment plans.